Contribution Margin Calculator
Find out how much of your revenue actually goes toward covering fixed costs and generating profit. Enter your revenue, variable costs, units sold, and fixed costs to see your contribution margin ratio, per-unit margin, and break-even point.
The contribution margin tells you how much money is left from each sale after covering variable costs. If your company earns $500,000 in revenue with $300,000 in variable costs, the contribution margin is $200,000, or 40%. That means 40 cents of every dollar earned goes toward fixed costs and profit.
Per-unit contribution margin is equally useful. If you sold 10,000 units, each unit contributes $20 toward fixed costs. With $100,000 in fixed costs, you need to sell 5,000 units just to break even. Everything beyond that is profit.
Why Contribution Margin Matters
This metric helps you decide which products to prioritize. A product with a 60% contribution margin deserves more attention than one at 15%, assuming similar sales potential. It also helps with pricing decisions -- if you lower prices by 10%, how many more units do you need to sell to maintain the same total contribution?
Manufacturers, retailers, and SaaS companies all rely on contribution margin analysis. For SaaS, variable costs are often low (hosting, payment processing), resulting in contribution margins of 80-90%. For retail, margins typically range from 20-50% depending on the product category.